SouthState Corporation Reports First Quarter 2023 Results, Declares Quarterly Cash Dividend

WINTER HAVEN, Fla., April 27, 2023 /PRNewswire/ -- SouthState Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month period ended March 31, 2023.

"SouthState's first quarter results demonstrate the resilience of our franchise", said John C. Corbett, Chief Executive Officer.  "In a turbulent macro environment, we delivered growth in loans, deposits, liquidity, and capital ratios.  Furthermore, earnings per share increased 32% from the same period last year.  Looking ahead, SouthState is positioned to be opportunistic as the economic cycle unfolds."

Highlights of the first quarter of 2023 include:

Returns

• Reported Diluted Earnings per Share ("EPS") of $1.83; Adjusted Diluted EPS (Non-GAAP) of $1.93
• Net Income of $139.9 million; Adjusted Net Income (Non-GAAP) of $147.2 million
• Return on Average Common Equity of 11.0% and Return on Average Tangible Common Equity (Non-GAAP) of 18.8%; Adjusted Return on Average Tangible Common Equity (Non-GAAP) of 19.8%*
• Return on Average Assets ("ROAA") of 1.29%; Adjusted ROAA (Non-GAAP) of 1.35%*
• Pre-Provision Net Revenue ("PPNR") per weighted average diluted share (Non-GAAP) of $2.90, up 62% from $1.79 a year ago
• Book Value per Share of $69.19 increased by $2.15 per share compared to the prior quarter
• Tangible Book Value ("TBV") per Share (Non-GAAP) of $42.40, up 6% from the prior quarter

∗ Annualized percentages

Performance

• Net Interest Income of $381 million; Core Net Interest Income (excluding loan accretion and deferred fees on PPP) (Non-GAAP) decreased $15 million from prior quarter
• Net Interest Margin ("NIM"), non-tax equivalent and tax equivalent (Non-GAAP) of 3.92% and 3.93%, respectively, up 1.17% and 1.16%, respectively, from the first quarter of 2022
• Noninterest Income of $71 million, up $8 million compared to the prior quarter; Noninterest Income represented 0.66% of average assets for the first quarter of 2023
• Efficiency Ratio of 51%; Adjusted Efficiency Ratio (Non-GAAP) of 49%
• $33.1 million Provision for Credit Losses ("PCL"), including provision for unfunded commitments, driven by moderate changes in economic forecasts and loan growth, in spite of net loan recoveries and only $1.0 million in total net charge-offs (including DDA charge-offs)

Balance Sheet

• Loans increased $519 million, or 7% annualized, led by consumer real estate; ending loan to deposit ratio of 84%
• Deposits increased $51 million, or 1% annualized as brokered CDs increased $1.2 billion, offset by a $400 million decline in public funds due to expected first quarter seasonality; excluding brokered CDs, deposits declined $1.2 billion from prior quarter
• Total deposit cost was 0.63%, up 42 basis points from prior quarter
• Total cash and cash equivalents increased $684 million to $2.0 billion at the end of the current quarter
• Other borrowings increased $900 million due to FHLB advances outstanding as of current quarter-end
• Strong capital position with Tangible Common Equity, Total Risk-Based Capital, and Tier 1 Leverage ratios of 7.5%, 13.3% and 9.1%, respectively†

† Preliminary

Subsequent Events

• The Board of Directors of the Company declared a quarterly cash dividend on its common stock of $0.50 per share, payable on May 19, 2023 to shareholders of record as of May 12, 2023

Financial Performance

		Three Months Ended
(Dollars in thousands, except per share data)		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
INCOME STATEMENT		2023			2022			2022			2022			2022
Interest income
Loans, including fees (1)		$	393,366		$	359,552		$	312,856		$	272,000		$	233,617
Investment securities, trading securities, federal funds sold and securities
purchased under agreements to resell (8)			57,043			64,337			63,476			54,333			36,854
Total interest income			450,409			423,889			376,332			326,333			270,471
Interest expense
Deposits (8)			55,942			19,945			7,534			4,914			4,591
Federal funds purchased, securities sold under agreements
to repurchase, and other borrowings			13,204			7,940			6,464			5,604			4,362
Total interest expense			69,146			27,885			13,998			10,518			8,953
Net interest income (8)			381,263			396,004			362,334			315,815			261,518
Provision (recovery) for credit losses			33,091			47,142			23,876			19,286			(8,449)
Net interest income after provision (recovery) for credit losses			348,172			348,862			338,458			296,529			269,967
Noninterest income (8)			71,355			63,392			73,053			86,756			86,046
Noninterest expense
Operating expense			231,093			227,957			226,754			225,779			218,324
Merger, branch consolidation and severance related expense			9,412			1,542			13,679			5,390			10,276
Total noninterest expense			240,505			229,499			240,433			231,169			228,600
Income before provision for income taxes			179,022			182,755			171,078			152,116			127,413
Income taxes provision			39,096			39,253			38,035			32,941			27,084
Net income		$	139,926		$	143,502		$	133,043		$	119,175		$	100,329
Adjusted net income (non-GAAP) (2)
Net income (GAAP)		$	139,926		$	143,502		$	133,043		$	119,175		$	100,329
Securities gains, net of tax			(35)			—			(24)			—			—
Initial provision for credit losses - NonPCD loans and UFC from ACBI, net of tax			—			—			—			—			13,492
Merger, branch consolidation and severance related expense, net of tax			7,356			1,211			10,638			4,223			8,092
Adjusted net income (non-GAAP)		$	147,247		$	144,713		$	143,657		$	123,398		$	121,913
Basic earnings per common share		$	1.84		$	1.90		$	1.76		$	1.58		$	1.40
Diluted earnings per common share		$	1.83		$	1.88		$	1.75		$	1.57		$	1.39
Adjusted net income per common share - Basic (non-GAAP) (2)		$	1.94		$	1.91		$	1.90		$	1.64		$	1.71
Adjusted net income per common share - Diluted (non-GAAP) (2)		$	1.93		$	1.90		$	1.89		$	1.62		$	1.69
Dividends per common share		$	0.50		$	0.50		$	0.50		$	0.49		$	0.49
Basic weighted-average common shares outstanding			75,902,440			75,639,640			75,605,960			75,461,157			71,447,429
Diluted weighted-average common shares outstanding			76,388,954			76,326,777			76,182,131			76,094,198			72,110,746
Effective tax rate			21.84 %			21.48 %			22.23 %			21.66 %			21.26 %

Performance and Capital Ratios

		Three Months Ended
		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
		2023			2022			2022			2022			2022
PERFORMANCE RATIOS
Return on average assets (annualized) (8)			1.29	%		1.28	%		1.17	%		1.05	%		0.95	%
Adjusted return on average assets (annualized) (non-GAAP) (2) (8)			1.35	%		1.29	%		1.27	%		1.09	%		1.15	%
Return on average common equity (annualized)			10.96	%		11.41	%		10.31	%		9.36	%		8.24	%
Adjusted return on average common equity (annualized) (non-GAAP) (2)			11.53	%		11.50	%		11.13	%		9.69	%		10.01	%
Return on average tangible common equity (annualized) (non-GAAP) (3)			18.81	%		20.17	%		17.99	%		16.59	%		13.97	%
Adjusted return on average tangible common equity (annualized) (non-GAAP) (2) (3)			19.75	%		20.33	%		19.36	%		17.15	%		16.79	%
Efficiency ratio (tax equivalent)			51.41	%		47.96	%		53.14	%		54.92	%		62.99	%
Adjusted efficiency ratio (non-GAAP) (4)			49.34	%		47.63	%		50.02	%		53.59	%		60.05	%
Dividend payout ratio (5)			27.09	%		26.40	%		28.44	%		31.03	%		33.71	%
Book value per common share		$	69.19		$	67.04		$	65.03		$	66.64		$	68.30
Tangible book value per common share (non-GAAP) (3)		$	42.40		$	40.09		$	37.97		$	39.47		$	41.05
CAPITAL RATIOS
Equity-to-assets (8)			11.7	%		11.6	%		11.1	%		11.0	%		11.2	%
Tangible equity-to-tangible assets (non-GAAP) (3) (8)			7.5	%		7.2	%		6.8	%		6.8	%		7.1	%
Tier 1 leverage (6) (8) *			9.1	%		8.7	%		8.4	%		8.0	%		8.5	%
Tier 1 common equity (6) (8) *			11.1	%		11.0	%		11.0	%		11.1	%		11.4	%
Tier 1 risk-based capital (6) (8) *			11.1	%		11.0	%		11.0	%		11.1	%		11.4	%
Total risk-based capital (6) (8) *			13.3	%		13.0	%		13.0	%		13.0	%		13.3	%

Balance Sheet

		Ending Balance
(Dollars in thousands, except per share and share data)		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
BALANCE SHEET		2023			2022			2022			2022			2022
Assets
Cash and due from banks		$	558,158		$	548,387		$	394,794		$	561,516		$	588,372
Federal funds sold and interest-earning deposits with banks (8)			1,438,504			764,176			2,529,415			4,259,490			5,604,419
Cash and cash equivalents			1,996,662			1,312,563			2,924,209			4,821,006			6,192,791
Trading securities, at fair value			16,039			31,263			51,940			88,088			74,234
Investment securities:
Securities held to maturity			2,636,673			2,683,241			2,738,178			2,806,465			2,827,769
Securities available for sale, at fair value			5,159,999			5,326,822			5,369,610			5,666,008			5,924,206
Other investments			217,991			179,717			179,755			179,815			179,258
Total investment securities			8,014,663			8,189,780			8,287,543			8,652,288			8,931,233
Loans held for sale			27,289			28,968			34,477			73,880			130,376
Loans:
Purchased credit deteriorated			1,325,400			1,429,731			1,544,562			1,707,592			1,939,033
Purchased non-credit deteriorated			5,620,290			5,943,092			6,365,175			6,908,234			7,633,824
Non-acquired			23,750,452			22,805,039			20,926,566			19,319,440			16,983,570
Less allowance for credit losses			(370,645)			(356,444)			(324,398)			(319,708)			(300,396)
Loans, net			30,325,497			29,821,418			28,511,905			27,615,558			26,256,031
Other real estate owned ("OREO")			3,473			1,023			2,160			1,431			3,290
Premises and equipment, net			517,146			520,635			531,160			562,781			568,332
Bank owned life insurance			967,750			964,708			960,052			953,970			942,922
Mortgage servicing rights			85,406			86,610			90,459			87,463			83,339
Core deposit and other intangibles			109,603			116,450			125,390			132,694			140,364
Goodwill			1,923,106			1,923,106			1,922,525			1,922,525			1,924,024
Other assets (8)			937,193			922,172			980,557			854,506			829,786
Total assets		$	44,923,827		$	43,918,696		$	44,422,377		$	45,766,190		$	46,076,722
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing		$	12,422,583		$	13,168,656		$	13,660,244		$	14,337,018		$	14,052,332
Interest-bearing (8)			23,979,009			23,181,967			23,249,545			24,097,601			24,598,679
Total deposits			36,401,592			36,350,623			36,909,789			38,434,619			38,651,011
Federal funds purchased and securities
sold under agreements to repurchase			544,108			556,417			557,802			669,999			770,409
Other borrowings			1,292,182			392,275			392,368			392,460			405,553
Reserve for unfunded commitments			85,068			67,215			52,991			32,543			30,368
Other liabilities (8)			1,351,873			1,477,239			1,588,241			1,196,144			1,044,973
Total liabilities			39,674,823			38,843,769			39,501,191			40,725,765			40,902,314
Shareholders' equity:
Common stock - $2.50 par value; authorized 160,000,000 shares			189,649			189,261			189,191			189,103			189,403
Surplus			4,224,503			4,215,712			4,207,040			4,195,976			4,214,897
Retained earnings			1,448,636			1,347,042			1,241,413			1,146,230			1,064,064
Accumulated other comprehensive loss			(613,784)			(677,088)			(716,458)			(490,884)			(293,956)
Total shareholders' equity			5,249,004			5,074,927			4,921,186			5,040,425			5,174,408
Total liabilities and shareholders' equity		$	44,923,827		$	43,918,696		$	44,422,377		$	45,766,190		$	46,076,722
Common shares issued and outstanding			75,859,665			75,704,563			75,676,445			75,641,322			75,761,018

Net Interest Income and Margin

		Three Months Ended
		Mar. 31, 2023								Dec. 31, 2022								Mar. 31, 2022
(Dollars in thousands)		Average			Income/			Yield/		Average			Income/			Yield/		Average			Income/			Yield/
YIELD ANALYSIS		Balance			Expense			Rate		Balance			Expense			Rate		Balance			Expense			Rate
Interest-Earning Assets:
Federal funds sold and interest-earning deposits with banks (8)		$	759,239		$	8,921		4.77 %		$	1,849,877		$	16,491		3.54 %		$	5,715,785		$	2,859		0.20 %
Investment securities			8,232,582			48,122		2.37 %			8,286,894			47,846		2.29 %			7,895,281			33,995		1.75 %
Loans held for sale			23,123			402		7.05 %			25,633			401		6.21 %			110,542			869		3.19 %
Total loans, excluding PPP			30,384,754			392,941		5.24 %			29,480,843			359,120		4.83 %			24,675,512			231,373		3.80 %
Total PPP loans			9,642			23		0.97 %			12,489			31		0.98 %			167,541			1,375		3.33 %
Total loans held for investment			30,394,396			392,964		5.24 %			29,493,332			359,151		4.83 %			24,843,053			232,748		3.80 %
Total interest-earning assets (8)			39,409,340			450,409		4.64 %			39,655,736			423,889		4.24 %			38,564,661			270,471		2.84 %
Noninterest-earning assets (8)			4,695,138								4,774,158								4,342,607
Total Assets		$	44,104,478							$	44,429,894							$	42,907,268
Interest-Bearing Liabilities ("IBL"):
Transaction and money market accounts (8)		$	16,874,909		$	40,516		0.97 %		$	17,044,865		$	16,901		0.39 %		$	17,471,805		$	2,180		0.05 %
Savings deposits			3,298,221			1,756		0.22 %			3,536,330			1,021		0.11 %			3,408,129			130		0.02 %
Certificates and other time deposits			3,114,354			13,670		1.78 %			2,444,361			2,023		0.33 %			2,848,829			2,281		0.32 %
Federal funds purchased			193,259			2,187		4.59 %			186,232			1,694		3.61 %			354,899			111		0.13 %
Repurchase agreements			373,563			666		0.72 %			363,336			253		0.28 %			438,258			158		0.15 %
Other borrowings			785,571			10,351		5.34 %			435,806			5,993		5.46 %			354,133			4,093		4.69 %
Total interest-bearing liabilities (8)			24,639,877			69,146		1.14 %			24,010,930			27,885		0.46 %			24,876,053			8,953		0.15 %
Noninterest-bearing liabilities ("Non-IBL") (8)			14,287,553								15,427,380								13,094,050
Shareholders' equity			5,177,048								4,991,584								4,937,165
Total Non-IBL and shareholders' equity			19,464,601								20,418,964								18,031,215
Total Liabilities and Shareholders' Equity		$	44,104,478							$	44,429,894							$	42,907,268
Net Interest Income and Margin (Non-Tax Equivalent) (8)					$	381,263		3.92 %					$	396,004		3.96 %					$	261,518		2.75 %
Net Interest Margin (Tax Equivalent) (non-GAAP) (8)								3.93 %								3.99 %								2.77 %
Total Deposit Cost (without Debt and Other Borrowings)								0.63 %								0.21 %								0.05 %
Overall Cost of Funds (including Demand Deposits)								0.75 %								0.29 %								0.10 %
Total Accretion on Acquired Loans (1)					$	7,398							$	7,350							$	6,741
Total Deferred Fees on PPP Loans					$	—							$	—							$	983
Tax Equivalent ("TE") Adjustment					$	1,020							$	2,397							$	1,885
(1)  The remaining loan discount on acquired loans to be accreted into loan interest income totals $64.7 million as of March 31, 2023.

Noninterest Income and Expense

		Three Months Ended
		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
(Dollars in thousands)		2023			2022			2022			2022			2022
Noninterest Income:
Fees on deposit accounts		$	29,859		$	33,612		$	30,327		$	32,862		$	28,009
Mortgage banking income (loss)			4,332			(545)			2,262			5,480			10,594
Trust and investment services income			9,937			9,867			9,603			9,831			9,718
Securities gains, net			45			—			30			—			—
Correspondent banking and capital market income (8)			21,956			16,760			20,552			27,604			27,994
Expense on centrally-cleared variation margin (8)			(8,362)			(8,451)			(4,125)			(1,536)			(44)
Total Correspondent banking and capital market income (8)			13,594			8,309			16,427			26,068			27,950
Bank owned life insurance income			6,813			6,723			6,082			6,246			5,260
Other			6,775			5,426			8,322			6,269			4,515
Total Noninterest Income (8)		$	71,355		$	63,392		$	73,053		$	86,756		$	86,046
Noninterest Expense:
Salaries and employee benefits		$	144,060		$	140,440		$	139,554		$	137,037		$	137,673
Occupancy expense			21,533			22,412			22,490			22,759			21,840
Information services expense			19,925			19,847			20,714			19,947			19,193
OREO and loan related expense (income)			169			78			532			(3)			(238)
Business development and staff related			5,957			5,851			5,090			4,916			4,276
Amortization of intangibles			7,299			8,027			7,837			8,847			8,494
Professional fees			3,702			3,756			3,495			4,331			3,749
Supplies and printing expense			2,640			2,411			2,621			2,400			2,189
FDIC assessment and other regulatory charges			6,294			6,589			6,300			5,332			4,812
Advertising and marketing			2,118			2,669			2,170			2,286			1,763
Other operating expenses			17,396			15,877			15,951			17,927			14,573
Merger, branch consolidation and severance related expense *			9,412			1,542			13,679			5,390			10,276
Total Noninterest Expense		$	240,505		$	229,499		$	240,433		$	231,169		$	228,600
*  During the current quarter, the Company recorded $8.1 million in severance payments, which are included in the Merger, branch consolidation and severance related expense in the table above.

Loans and Deposits

The following table presents a summary of the loan portfolio by type (dollars in thousands):

		Ending Balance
(Dollars in thousands)		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
LOAN PORTFOLIO		2023			2022			2022			2022			2022
Construction and land development * †		$	2,749,290		$	2,860,360		$	2,550,552		$	2,527,062		$	2,316,313
Investor commercial real estate*			8,957,507			8,769,201			8,641,316			8,393,630			8,158,457
Commercial owner occupied real estate			5,522,514			5,460,193			5,426,216			5,421,725			5,346,583
Commercial and industrial			5,321,306			5,313,483			4,977,737			4,807,528			4,566,641
Consumer real estate *			6,860,831			6,475,210			5,977,120			5,505,531			4,988,736
Consumer/other			1,284,694			1,299,415			1,263,362			1,279,790			1,179,697
Total loans		$	30,696,142		$	30,177,862		$	28,836,303		$	27,935,266		$	26,556,427
* Single family home construction-to-permanent loans originated by the Company's mortgage banking division are included in construction and land development category until completion.  Investor commercial real estate loans include commercial non-owner occupied real estate and other income producing property.  Consumer real estate includes consumer owner occupied real estate and home equity loans.
† Includes single family home construction-to-permanent loans of $893.7 million, $904.1 million, $881.3 million, $795.7 million, and $733.7 million for the quarters ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
		Ending Balance
(Dollars in thousands)		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
DEPOSITS		2023			2022			2022			2022			2022
Noninterest-bearing checking		$	12,422,583		$	13,168,656		$	13,660,244		$	14,337,018		$	14,052,332
Interest-bearing checking			8,316,023			8,955,519			8,741,447			8,953,332			9,275,208
Savings			3,156,214			3,464,351			3,602,560			3,616,819			3,479,743
Money market (8)			8,388,275			8,342,111			8,369,826			8,823,025			9,015,186
Time deposits			4,118,497			2,419,986			2,535,712			2,704,425			2,828,542
Total Deposits (8)		$	36,401,592		$	36,350,623		$	36,909,789		$	38,434,619		$	38,651,011
Core Deposits (excludes Time Deposits) (8)		$	32,283,095		$	33,930,637		$	34,374,077		$	35,730,194		$	35,822,469

Asset Quality

		Ending Balance
		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
(Dollars in thousands)		2023			2022			2022			2022			2022
NONPERFORMING ASSETS:
Non-acquired
Non-acquired nonaccrual loans and restructured loans on nonaccrual		$	68,176		$	44,671		$	34,374		$	20,716		$	19,582
Accruing loans past due 90 days or more			2,667			2,358			2,358			1,371			22,818
Non-acquired OREO and other nonperforming assets			186			245			114			93			464
Total non-acquired nonperforming assets			71,029			47,274			36,846			22,180			42,864
Acquired
Acquired nonaccrual loans and restructured loans on nonaccrual			52,795			59,554			61,866			63,526			59,267
Accruing loans past due 90 days or more			983			1,992			1,430			4,418			12,768
Acquired OREO and other nonperforming assets			3,446			922			2,234			1,577			3,118
Total acquired nonperforming assets			57,224			62,468			65,530			69,521			75,153
Total nonperforming assets		$	128,253		$	109,742		$	102,376		$	91,701		$	118,017
		Three Months Ended
		Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
		2023			2022			2022			2022			2022
ASSET QUALITY RATIOS:
Allowance for credit losses as a percentage of loans			1.21 %			1.18 %			1.12 %			1.14 %			1.13 %
Allowance for credit losses, including reserve for unfunded commitments, as a percentage of loans			1.48 %			1.40 %			1.31 %			1.26 %			1.25 %
Allowance for credit losses as a percentage of nonperforming loans			297.42 %			328.29 %			324.30 %			355.11 %			262.50 %
Net charge-offs (recoveries) as a percentage of average loans (annualized)			0.01 %			0.01 %			(0.02) %			0.03 %			0.04 %
Total nonperforming assets as a percentage of total assets			0.29 %			0.25 %			0.23 %			0.20 %			0.26 %
Nonperforming loans as a percentage of period end loans			0.41 %			0.36 %			0.35 %			0.32 %			0.43 %

Current Expected Credit Losses ("CECL")

Below is a table showing the roll forward of the ACL and UFC for the first quarter of 2023:

		Allowance for Credit Losses ("ACL and UFC")
		NonPCD ACL			PCD ACL			Total ACL			UFC
Ending balance 12/31/2022		$	309,606		$	46,838		$	356,444		$	67,215
Charge offs			(3,858)			—			(3,858)			—
Acquired charge offs			(658)			(111)			(769)			—
Recoveries			1,555			—			1,555			—
Acquired recoveries			772			1,262			2,034			—
Provision (recovery) for credit losses			20,498			(5,259)			15,239			17,853
Ending balance 3/31/2023		$	327,915		$	42,730		$	370,645		$	85,068
Period end loans (includes PPP Loans)		$	29,370,742		$	1,325,400		$	30,696,142			N/A
Allowance for Credit Losses to Loans (includes PPP Loans)			1.12 %			3.22 %			1.21 %			N/A
Period end loans (excludes PPP Loans)		$	29,361,548		$	1,325,400		$	30,686,948			N/A
Allowance for Credit Losses to Loans  (excludes PPP Loans)			1.12 %			3.22 %			1.21 %			N/A
Unfunded commitments (off balance sheet) *											$	10,089,388
Reserve to unfunded commitments (off balance sheet)												0.84 %
* Unfunded commitments exclude unconditionally cancelable commitments and letters of credit.

Conference Call

The Company will host a conference call to discuss its first quarter results at 9:00 a.m. Eastern Time on April 28, 2023.  Callers wishing to participate may call toll-free by dialing 833-470-1428.  The number for international participants is (929) 526-1599.  The conference ID number is 991051.   Alternatively, individuals may listen to the live webcast of the presentation by visiting SouthStateBank.com.  An audio replay of the live webcast is expected to be available by the evening of April 28, 2023 on the Investor Relations section of SouthStateBank.com.

SouthState Corporation is a financial services company headquartered in Winter Haven, Florida.  SouthState Bank, N.A., the Company's nationally chartered bank subsidiary, provides consumer, commercial, mortgage and wealth management solutions to more than one million customers throughout Florida, Alabama, Georgia, the Carolinas and Virginia.  The Bank also serves clients coast to coast through its correspondent banking division.  Additional information is available at SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables that provide a reconciliation of non-GAAP measures to GAAP measures.  Although other companies may use calculation methods that differ from those used by SouthState for non-GAAP measures, Management believes that these non-GAAP measures provide additional useful information, which allows readers to evaluate the ongoing performance of the Company.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.

(Dollars and shares in thousands, except per share data)		Three Months Ended
PRE-PROVISION NET REVENUE ("PPNR") (NON-GAAP)		Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022				Jun. 30, 2022				Mar. 31, 2022
Net income (GAAP)		$	139,926			$	143,502			$	133,043			$	119,175			$	100,329
Provision (recovery) for credit losses			33,091				47,142				23,876				19,286				(8,449)
Tax provision			39,096				39,253				38,035				32,941				27,084
Merger, branch consolidation and severance related expense			9,412				1,542				13,679				5,390				10,276
Securities gains			(45)				—				(30)				—				—
Pre-provision net revenue (PPNR) (Non-GAAP)		$	221,480			$	231,439			$	208,603			$	176,792			$	129,240
Average asset balance (GAAP)		$	44,104,478			$	44,429,894			$	44,985,713			$	45,576,742			$	42,907,268
PPNR ROAA			2.04	%			2.07	%			1.84	%			1.56	%			1.22	%
Diluted weighted-average common shares outstanding			76,389				76,327				76,182				76,094				72,111
PPNR per weighted-average common shares outstanding		$	2.90			$	3.03			$	2.74			$	2.32			$	1.79
(Dollars in thousands)		Three Months Ended
CORE NET INTEREST INCOME (NON-GAAP)		Mar. 31, 2023				Dec. 31, 2022				Sep. 30, 2022				Jun. 30, 2022				Mar. 31, 2022
Net interest income (GAAP) (8)		$	381,263			$	396,004			$	362,334			$	315,815			$	261,518
Less:
Total accretion on acquired loans			7,398				7,350				9,550				12,770				6,741
Total deferred fees on PPP loans			—				—				—				8				983
Core net interest income (Non-GAAP)		$	373,865			$	388,654			$	352,784			$	303,037			$	253,794
NET INTEREST MARGIN ("NIM"), TAX EQUIVALENT (NON-GAAP)
Net interest income (GAAP) (8)		$	381,263			$	396,004			$	362,334			$	315,815			$	261,518
Total average interest-earning assets (8)			39,409,340				39,655,736				40,451,174				40,899,365				38,564,661
NIM, non-tax equivalent (8)			3.92	%			3.96	%			3.55	%			3.10	%			2.75	%
Tax equivalent adjustment (included in NIM, tax equivalent)			1,020				2,397				2,345				2,249				1,885
Net interest income, tax equivalent (Non-GAAP) (8)		$	382,283			$	398,401			$	364,679			$	318,064			$	263,403
NIM, tax equivalent (Non-GAAP) (8)			3.93	%			3.99	%			3.58	%			3.12	%			2.77	%
		Three Months Ended
(Dollars in thousands, except per share data)		Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
RECONCILIATION OF GAAP TO NON-GAAP		2023				2022				2022				2022				2022
Adjusted Net Income (non-GAAP) (2)
Net income (GAAP)		$	139,926			$	143,502			$	133,043			$	119,175			$	100,329
Securities gains, net of tax			(35)				—				(24)				—				—
PCL - NonPCD loans and UFC, net of tax			—				—				—				—				13,492
Merger, branch consolidation and severance related expense, net of tax			7,356				1,211				10,638				4,223				8,092
Adjusted net income (non-GAAP)		$	147,247			$	144,713			$	143,657			$	123,398			$	121,913
Adjusted Net Income per Common Share - Basic (2)
Earnings per common share - Basic (GAAP)		$	1.84			$	1.90			$	1.76			$	1.58			$	1.40
Effect to adjust for securities gains			(0.00)				—				(0.00)				—				—
Effect to adjust for PCL - NonPCD loans and UFC, net of tax			—				—				—				—				0.19
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			0.10				0.01				0.14				0.06				0.12
Adjusted net income per common share - Basic (non-GAAP)		$	1.94			$	1.91			$	1.90			$	1.64			$	1.71
Adjusted Net Income per Common Share - Diluted (2)
Earnings per common share - Diluted (GAAP)		$	1.83			$	1.88			$	1.75			$	1.57			$	1.39
Effect to adjust for securities gains			(0.00)				—				(0.00)				—				—
Effect to adjust for PCL - NonPCD loans and UFC, net of tax			—				—				—				—				0.19
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			0.10				0.02				0.14				0.05				0.11
Adjusted net income per common share - Diluted (non-GAAP)		$	1.93			$	1.90			$	1.89			$	1.62			$	1.69
Adjusted Return on Average Assets (2)
Return on average assets (GAAP) (8)			1.29	%			1.28	%			1.17	%			1.05	%			0.95	%
Effect to adjust for securities gains			(0.00)	%			—	%			(0.00)	%			—	%			—	%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax			—	%			—	%			—	%			—	%			0.13	%
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			0.06	%			0.01	%			0.10	%			0.04	%			0.07	%
Adjusted return on average assets (non-GAAP) (8)			1.35	%			1.29	%			1.27	%			1.09	%			1.15	%
Adjusted Return on Average Common Equity (2)
Return on average common equity (GAAP)			10.96	%			11.41	%			10.31	%			9.36	%			8.24	%
Effect to adjust for securities gains			(0.00)	%			—	%			(0.00)	%			—	%			—	%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax			—	%			—	%			—	%			—	%			1.11	%
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			0.57	%			0.09	%			0.82	%			0.33	%			0.66	%
Adjusted return on average common equity (non-GAAP)			11.53	%			11.50	%			11.13	%			9.69	%			10.01	%
Return on Average Common Tangible Equity (3)
Return on average common equity (GAAP)			10.96	%			11.41	%			10.31	%			9.36	%			8.24	%
Effect to adjust for intangible assets			7.85	%			8.76	%			7.68	%			7.23	%			5.73	%
Return on average tangible equity (non-GAAP)			18.81	%			20.17	%			17.99	%			16.59	%			13.97	%
Adjusted Return on Average Common Tangible Equity (2) (3)
Return on average common equity (GAAP)			10.96	%			11.41	%			10.31	%			9.36	%			8.24	%
Effect to adjust for securities gains			(0.00)	%			—	%			(0.00)	%			—	%			—	%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax			—	%			—	%			—	%			—	%			1.11	%
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			0.58	%			0.10	%			0.82	%			0.33	%			0.66	%
Effect to adjust for intangible assets			8.21	%			8.82	%			8.23	%			7.46	%			6.78	%
Adjusted return on average common tangible equity (non-GAAP)			19.75	%			20.33	%			19.36	%			17.15	%			16.79	%
Adjusted Efficiency Ratio (4)
Efficiency ratio			51.41	%			47.96	%			53.14	%			54.92	%			62.99	%
Effect to adjust for merger, branch consolidation and severance related expense, net of tax			(2.07)	%			(0.33)	%			(3.12)	%			(1.33)	%			(2.94)	%
Adjusted efficiency ratio			49.34	%			47.63	%			50.02	%			53.59	%			60.05	%
Tangible Book Value Per Common Share (3)
Book value per common share (GAAP)		$	69.19			$	67.04			$	65.03			$	66.64			$	68.30
Effect to adjust for intangible assets			(26.79)				(26.95)				(27.06)				(27.17)				(27.25)
Tangible book value per common share (non-GAAP)		$	42.40			$	40.09			$	37.97			$	39.47			$	41.05
Tangible Equity-to-Tangible Assets (3)
Equity-to-assets (GAAP) (8)			11.68	%			11.56	%			11.08	%			11.01	%			11.23	%
Effect to adjust for intangible assets			(4.18)	%			(4.31)	%			(4.30)	%			(4.18)	%			(4.16)	%
Tangible equity-to-tangible assets (non-GAAP) (8)			7.50	%			7.25	%			6.78	%			6.83	%			7.07	%

Certain prior period information has been reclassified to conform to the current period presentation, and these reclassifications had no impact on net income or equity as previously reported.

Footnotes to tables:
(1)	Includes loan accretion (interest) income related to the discount on acquired loans of $7.4 million, $7.3 million, $9.6 million, $12.8 million, and $6.7 million during the quarters ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
(2)	Adjusted earnings, adjusted return on average assets, adjusted EPS, and adjusted return on average equity are non-GAAP measures and exclude the gains or losses on sales of securities, merger, branch consolidation and severance related expense, and initial PCL on nonPCD loans and unfunded commitments from acquisitions.  Management believes that non-GAAP adjusted measures provide additional useful information that allows readers to evaluate the ongoing performance of the company.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.  Adjusted earnings and the related adjusted return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger, branch consolidation and severance related expense of $9.4 million, $1.5 million, $13.7 million, $5.4 million, and $10.3 million, for the quarters ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively; (b) net securities gains of $45,000 and $30,000 for the quarters ended March 31, 2023 and September 30, 2022, respectively; and (c) initial PCL on nonPCD loans and unfunded commitments acquired from ACBI of $17.1 million for the quarter ended March 31, 2022.
(3)	The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets.  The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income.  Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. The sections titled "Reconciliation of Non-GAAP to GAAP" provide tables that reconcile non-GAAP measures to GAAP.
(4)	Adjusted efficiency ratio is calculated by taking the noninterest expense excluding merger, branch consolidation and severance related expense and amortization of intangible assets, divided by net interest income and noninterest income excluding securities gains (losses). The pre-tax amortization expenses of intangible assets were $7.3 million, $8.0 million, $7.8 million, $8.8 million, and $8.5 million for the quarters ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
(5)	The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.
(6)	March 31, 2023 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed.
(7)	Loan data excludes mortgage loans held for sale.
(8)	During the fourth quarter of 2022, the Company determined the variation margin payments for its interest rate swaps centrally cleared through London Clearing House ("LCH") and Chicago Mercantile Exchange ("CME") met the legal characteristics of daily settlements of the derivatives rather than collateral.  As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. Depending on the net position, the fair value of the single unit of account is reported in other assets or other liabilities on the consolidated balance sheets, as opposed to interest-earning deposits or interest-bearing deposits.  In addition, the expense or income attributable to the variation margin payments for the centrally cleared swaps is reported in noninterest income, specifically within correspondent and capital markets income, as opposed to interest income or interest expense. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.  The table below discloses the net change in all the balance sheet and income statement line items, as well as performance metrics, impacted by the correction from collateralize-to-market to settle-to-market accounting treatment for prior periods.  There was no impact to net income or equity as previously reported.

 

		Three Months Ended
(Dollars in thousands)		Sep. 30,				Jun. 30,				Mar. 31,
INCOME STATEMENT		2022				2022				2022
Interest income:
Effect to interest income on federal funds sold and interest-earning
deposits with banks		$	1,522			$	674			$	7
Interest expense:
Effect to interest expense on money market deposits			(2,603)				(862)				(37)
Net interest income:
Net effect to net interest income		$	4,125			$	1,536			$	44
Noninterest Income:
Effect to correspondent banking and capital market income		$	(4,125)			$	(1,536)			$	(44)
BALANCE SHEET
Assets:
Effect to federal funds sold and interest-earning deposits with banks		$	114,514			$	98,907			$	160,185
Effect to other assets			(870,746)				(540,139)				(285,004)
Net effect to total assets		$	(756,232)			$	(441,232)			$	(124,819)
Liabilities:
Effect to money market deposits		$	(756,232)			$	(441,232)			$	(124,819)
Net effect to total liabilities		$	(756,232)			$	(441,232)			$	(124,819)
AVERAGE BALANCES
Interest-earning assets:
Effect to federal funds sold and interest-earning deposits with banks		$	210,108			$	211,970			$	37,638
Noninterest-earning assets:
Effect to noninterest-earning assets			(569,329)				(483,017)				(76,702)
Net effect to total average assets		$	(359,221)			$	(271,047)			$	(39,064)
Interest-bearing liabilities:
Effect to transaction and money market accounts		$	(359,221)			$	(271,047)			$	(1,387)
Noninterest-bearing liabilities:
Effect to Non-IBL			—				—				(37,677)
Net effect to total average liabilities		$	(359,221)			$	(271,047)			$	(39,064)
		Three Months Ended
		Sep. 30,				Jun. 30,				Mar. 31,
YIELD ANALYSIS		2022				2022				2022
Interest-earning assets:
Effect to federal funds sold and interest-earning deposits with banks			0.05	%			0.03	%			—	%
Effect to total interest-earning assets			(0.01)	%			(0.01)	%			(0.01)	%
Interest-bearing liabilities:
Effect to transaction and money market accounts			(0.06)	%			(0.01)	%			0.00	%
Effect to total interest-bearing liabilities			(0.04)	%			(0.01)	%			0.00	%
Net effect to NIM			0.02	%			0.00	%			—	%
Net effect to NIM, TE (non-GAAP)			0.03	%			—	%			—	%
PERFORMANCE RATIOS
Effect to return on average assets (annualized)			0.01	%			0.01	%			—	%
Effect to adjusted return on average assets (annualized) (non-GAAP) (2)			0.01	%			0.01	%			—	%
Effect to equity-to-assets			0.2	%			0.1	%			—	%
Effect to tangible equity-to-tangible assets (non-GAAP) (3)			0.1	%			—	%			0.1	%
Effect to Tier 1 leverage			0.1	%			0.1	%			—	%
Effect to Tier 1 common equity			—	%			—	%			—	%
Effect to Tier 1 risk-based capital			—	%			—	%			—	%
Effect to Total risk-based capital			0.1	%			—	%			—	%

Cautionary Statement Regarding Forward Looking Statements

Statements included in this communication, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on, among other things, management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and SouthState. Words and phrases such as "may," "approximately," "continue," "should," "expects," "projects," "anticipates," "is likely," "look ahead," "look forward," "believes," "will," "intends," "estimates," "strategy," "plan," "could," "potential," "possible" and variations of such words and similar expressions are intended to identify such forward-looking statements.

SouthState cautions readers that forward-looking statements are subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following: (1) economic downturn risk, potentially resulting in deterioration in the credit markets, inflation, greater than expected noninterest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from federal spending cuts and/or one or more federal budget-related impasses or actions; (2) interest rate risk primarily resulting from the interest rate environment, the number and pace of interest rate increases, and their impact on the Bank's earnings, including from the correspondent and mortgage divisions, housing demand, the market value of the bank's loan and securities portfolios, and the market value of SouthState's equity; (3) volatility in the financial services industry (including failures or rumors of failures of other depositor institutions), along with actions taken by governmental agencies to address such turmoil, could affect the ability of depository institutions, including us, to attract and retain depositors and to borrow or raise capital (4) risks related to the merger and integration of SouthState and Atlantic Capital including, among others, (i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (ii) the risk that the integration of Atlantic Capital's operations into SouthState's operations will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate Atlantic Capital's businesses into SouthState's businesses, (iii) the amount of the costs, fees, expenses and charges related to the merger, and (iv) reputational risk and the reaction of each company's customers, suppliers, employees or other business partners to the merger; (5) risks relating to the continued impact of the Covid19 pandemic on the Company, including to efficiencies and the control environment due to the changing work environment; (6) the impact of increasing digitization of the banking industry and movement of customers to on-line platforms, and the possible impact on the Bank's results of operations, customer base, expenses, suppliers and operations; (7) controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures; (8) potential deterioration in real estate values; (9) the impact of competition with other financial institutions, including deposit and loan pricing pressures and the resulting impact, including as a result of compression to net interest margin; (10) risks relating to the ability to retain our culture and attract and retain qualified people; (11) credit risks associated with an obligor's failure to meet the terms of any contract with the Bank or otherwise fail to perform as agreed under the terms of any loan-related document; (12) risks related to the ability of the Company to pursue its strategic plans which depend upon certain growth goals in our lines of business; (13) liquidity risk affecting the Bank's ability to meet its obligations when they come due; (14) risks associated with an anticipated increase in SouthState's investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities SouthState desires to acquire are not available on terms acceptable to SouthState; (15) unexpected outflows of uninsured deposits may require us to sell investment securities at a loss; (16) the loss of value of our investment portfolio could negatively impact market perceptions of us and could lead to deposit withdrawals; (17) price risk focusing on changes in market factors that may affect the value of traded instruments in "mark-to-market" portfolios; (18) transaction risk arising from problems with service or product delivery; (19) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (20) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and including the impact of special FDIC assessments, the Consumer Financial Protection Bureau regulations, and the possibility of changes in accounting standards, policies, principles and practices; (21) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (22) reputation risk that adversely affects earnings or capital arising from negative public opinion including the effects of social media on market perceptions of us and banks generally; (23) cybersecurity risk related to the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of internal or external security breaches, which may subject the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (24) reputational and operational risks associated with environment, social and governance (ESG) matters, including the impact of recently issued proposed regulatory guidance and regulation relating to climate change; (25) greater than expected noninterest expenses; (26) excessive loan losses; (27) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the Atlantic Capital integration, and potential difficulties in maintaining relationships with key personnel; (28) reputational risk and possible higher than estimated reduced revenue from announced changes in the Bank's consumer overdraft programs; (29) the risks of fluctuations in market prices for SouthState common stock that may or may not reflect economic condition or performance of SouthState; (30) the payment of dividends on SouthState common stock, which is subject to legal and regulatory limitations as well as the discretion of the board of directors of SouthState, SouthState's performance and other factors; (31) ownership dilution risk associated with potential acquisitions in which SouthState's stock may be issued as consideration for an acquired company; (32) operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash consideration; (33) major catastrophes such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on SouthState and its customers and other constituencies; (34) terrorist activities risk that results in loss of consumer confidence and economic disruptions; and (35) other factors that may affect future results of SouthState, as disclosed in SouthState's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed by SouthState with the U.S. Securities and Exchange Commission ("SEC") and available on the SEC's website at http://www.sec.gov, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. SouthState does not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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SOURCE SouthState Corporation